Adding to the gloom enveloping the American economy, the US Federal Reserve has cut the 2008 growth forecast for the nation to between 0.3% and 1.2%, down from 1.3-2%, but indicated that it would not cut interest rates further.

The US Fed also said that the unemployment rate too would rise to 5.7 per cent.

The US stock markets reacted to the US Fed's forecast with the Dow Jones index falling by 227.5 points to 12,601, and the US currency -- the dollar -- too slipping against the euro and the Japanese yen. The US Fed said data indicate a softening of the economy.

Rising oil prices, a shaky real estate sector, stagnant exports, high inflation rate and a noticeable drop in the spending patterns show that the economy is on the decline.